ABDUR RAHIM PANCHANAN PAL EDUCATIONAL TRUST,MURSHIDABAD vs. I.T.O., WARD - 42(1), BEHRAMPORE, MURSHIDABAD

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘A’ BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBERAND SHRI PRADIP KUMAR CHOUBEY, JUDICIAL MEMBER I.T.A. No.2635/KOL/2026 Assessment Year: (2018-19) Abdur Rahim Panchanan Pal ITO, Educational Trust, Vs. Ward – 42(1), NA Choa, Hariharpara, Murshidabad Murshidabad – 742166, West Bengal [PAN: AADTA7191H] (Appellant) .. (Respondent) Appellant by : Shri S. K. Tulsiyan, Advocate and Ms. Sonam Bajoria, CA Respondent by: Shri Sanjay Jha, Sr. DR Date of Hearing 29.09.2026 Date of Pronouncement 28.10.2026

O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER:

This appeal preferred by the assessee is against the order of learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (hereinafter referred to as the “ld.CIT(A)”], dated 12.05.2026 for the same Assessment Year (AY) 2018-19.

ITA No.2635/Kol/2026/A.Y.2018-19 Abdur Rahim Panchanan Pal Educational Trust vs. ITO 3. The facts of the case in brief are that the assessee is an educational Trust established with the object of carrying of educational activities on 28.09.2012. Main object of the trust is to impart, promote and spread education in arts. literature, science, engineering, management and commerce to the subject of the Union of India in respect of the Minority Section along with other common distressed people. The assessee filed return of income for AY 2018-19 on 26.10.2018 declaring total income of "NIL". Return of Income was selected for scrutiny for examination of the following issues:

(i) Expenditure for Charitable or Religious Purposes. (ii) Accumulated of Income by the Trust and (iii) Transaction of Trust with specified Person.

3.1 Thereafter notices u/s 143(2) and 142(1) of the IT Act, 1961 were issued and were duly served on the assessee. On examination of the return of income, it was noticed by the Ld. A.O that the assessee had not furnished any details in Schedule AI and Schedule ER, instead the assessee has claimed exemption under section 10(23C)(iiiad) of the Act for Rs.1,24,85,698/-, however as per the Rule 2BC of the IT Rules 1962, exemption under section 10(23C)(iiiad) is not allowed if the aggregate annual receipts are more than Rs.1 crore. The assessee however had annual receipts of Rs.1,24,85,698/- and had wrongly claimed exemption u/s 10(23C)(iiiad). Further the Ld. AO. also issued show cause notice to the assessee on 18.03.2021 to explain as to why assessment should not be completed by disallowing the payments made to its members amounting to Rs.93,50,700/- u/s 40(ba) of the Act. Thereafter vide assessment order passed u/s 143(3) of the IT Act, 1961 dated 05.04.2021. The AO made the following additions/disallowances:

ITA No.2635/Kol/2026/A.Y.2018-19 Abdur Rahim Panchanan Pal Educational Trust vs. ITO Net Surplus income over expenditure: Rs. 16,82,640/- Disallowance u/s 40(ba) of the Act Rs. 93,50,700/- Total income assessed: Rs. 1,10,33,340/-

"Page 9, para 6.1.6: With regard to the appellant's claim that payments of Rs. 93,50,700/- were made to teachers and not to specified persons, it us observed that this assertion is not supported by conclusive documentary evidence establishing identity, independence, and absence of relationship with persons covered w/s 13(3). The audit report itself indicates payments to specified persons. In absence of proper reconciliation and substantiation, the Ld. A.O. was justified in invoking provisions of section 13(1)(c) and denying exemption. Para 6.1.8, page 9 The appellant's contention regarding applicability of section 10 (230)(iiiad) on an institution-wise basis is also without merit. The law clearly provides that aggregate annual receipts of the educational institution must not exceed the prescribed limit. The appellant has not demonstrated that separate legal identities exist for each institution. In absence of such distinction, the aggregate receipts of Rs. 1,24,85,698/- exceeds the prescribed threshold, thereby making the appellant ineligible for exemption under the said provision". 5. We have heard the rival contentions and perused the materials on record. We note that the assessee trust was created with the objectives and purposes to impart, promote and education in art, literature, Science. Engineering Management and commerce to the subjects of the Union of India in respect of the Minority section along with other common distress people. For the implementation of its object, the assessee Trust established Bed. College and DI. Ed College. We note that books of accounts are maintained separately

ITA No.2635/Kol/2026/A.Y.2018-19 Abdur Rahim Panchanan Pal Educational Trust vs. ITO for each institution. Accounts are audited by a Chartered Accountant and a consolidated statement of account is prepared. On a perusal of the receipt and expenditure account of each of the colleges for AY 2018-19, we observe that the annual receipts of each of the College is below Rs.1.00 crore as prescribed in the law as under:

Name of the College Annual Receipts (Rs.) Bed College 97,74,884 DI.Ed College 29,61,053 Total 1,27,35,937

“Section 10(23C) any income received by any person on behalf of:- "(iiiad) any university or other educational institution existing solely for educational purposes and not for purpose of profit if the aggregate annual receipts of the person from such university or other educational institution or educational institutions do not exceed five crores rupees. 4

ITA No.2635/Kol/2026/A.Y.2018-19 Abdur Rahim Panchanan Pal Educational Trust vs. ITO [Substituted for "receipts of such university or educational institution do not exceed the amount of annual receipts as may be prescribed" by the Finance Act, 2021 w.e.f. 01.04.2022] Rule 2BC (1) For the purpose of sub-clause (iiiad) of clause (230) of section 10, the amount of annual receipts on or after the 1 day of April, 1998, of any University or other Educational Institution, existing solely for educational purposes and not for pursue of profit, shall be one crore.” 9. Sub-clause (iiiad) of Section 10(230) provides for an exemption for the income received by any person on behalf of the university or educational institution. The exemptions under the clause are available subject to the condition that the annual receipts of such university or educational institution does not exceed the annual receipts as may be prescribed.The Finance Act, 2021 incorporated the threshold limit in the provisions itself and it has increased the limit of said annual receipts, for exemption under sub-clauses (iiiad) and (iiiae) of section 10(23C), to Rs.5 crores. Finance Act, 2021 also provides that the revised threshold limit of Rs.5 crores shall apply for an assessee with respect to the aggregate receipts from university or educational institution as referred to in sub-clause (iiiad) and the hospital or institution as referred to in sub-clause (iiiae). In other words, if a trust running both medical and educational institutes, the annual receipts from all such institutes shall be aggregated and if it does not exceed Rs.5 crores the exemption shall be available.The Finance Act, 2021 also provides that the revised threshold limit of Rs.5 crores shall apply for an assessee with respect to the aggregate receipts from university or educational institution as referred to in sub-clause (iiiad) and the hospital or institution as referred to in sub-clause (iiiae). In other words, if a trust running both medical and educational institutes, the annual receipts from all such institutes shall be aggregated and if it does not exceed Rs. 5 crores the exemption shall be available.For example, before the amendment brought out by the Finance Act, 2021, if an organization is running 10 schools and the

ITA No.2635/Kol/2026/A.Y.2018-19 Abdur Rahim Panchanan Pal Educational Trust vs. ITO turnover of each school is less than Rs.1 crore then the exemption was available to the organization for all the schools without any registration or approval. The case of the assessee is squarely covered by a series of decisions as discussed below:-

 The Karnataka High Court in the case of CIT v. Children's Education Society 2013 34 taxmann.com 285 (Karnataka) held that if an assessee is having more than one educational institution then the 'aggregate annual receipt of each such educational institution has to be considered separately. If a trust is running 5 educational institutions, then each of such institution will enjoy the 1 crore limit.  The Chennai Tribunal in the case of PKD Trust v. ITO [2017] 79 taxmann.com 282 (Chennai-Trib.) has held that each educational institution should be considered separately for applying threshold annual receipt of Rs. Icrore for allowing exemption under section 10(230).  The Delhi Tribunal in the case of ACIT v. Shiksha Samiti [2015] 60 taxmann.com 428 (Delhi-Trib.) held that for exemption under section 10(230)(ifiad), 'aggregate annual receipts" refers to receipts by a particular institution. 10. But the Finance Act, 2021 substituted the words "receipts of such university or educational institution" with "receipts of the person from such university or universities or educational institution or educational institutions" in sub-clause (iiiad) and sub-clause (iiiae).Now coming to the facts of the assessee, it can be seen that the year under consideration is AY 2017-18, therefore ,the pre amended provisions of section 10(23C)(iiiad) will apply where the threshold limit of one crore is taken institution wise. As already stated in the above paragraphs the annual receipts of the colleges i.e. (B.ed. and Dl.Ed) are less than Rs. 1 crores for AY 2018-19 each. Therefore the assessee is entitled to claim exemption u/s 10(23C)(iiiad) of the IT Act, 1961 and the action of the Id. A.O as well of the Ld. CIT(A) is wrong and cannot be sustained. Considering these facts and the ratio laid in the above decisions , we

ITA No.2635/Kol/2026/A.Y.2018-19 Abdur Rahim Panchanan Pal Educational Trust vs. ITO are inclined to set aside the order of ld. CIT(A) and direct the AO to delete the addition by allowing exemption u/s u/s 10(23C)(iiiad) of the Act.

Particulars Amount (Rs.) For the Month of April 2017 D.El Teaching Staff 1,68,900 D.EI Non-Teaching Staff 31,085 B.ED Non-Teaching Staff 74,760 B.ED. Teaching Staff 5,04,480 Total 7,79,225/- 12. We note that the total salary for the month of April 2017 is Rs.7,79,225/- and for the whole year would be Rs.17,79,225*12] Rs.93,50,700/- which clearly matches with the receipt and expenditure account of the assessee. Salary register of the assessee is enclosed at pages 99 to 122 of the paperbook, which clearly shows that all the teaching and non-teaching staffs are qualified.Now the assessee by mistake in audit report of AY 2018-19 has mentioned the said amount of salary in Application or use of income or property for the benefit of persons referred to in section 13(3) and thus the AO in the assessment order has stated that as per the audit report, the assessee claimed to have made salary payments amounting to Rs.93,50,700/- to persons referred to in section 13(3) of the IT Act, 1961 and thus the assessee trust is not eligible for

ITA No.2635/Kol/2026/A.Y.2018-19 Abdur Rahim Panchanan Pal Educational Trust vs. ITO exemption under section 11 mainly on the grounds that the assessee has violated the provisions of section 13(1)(c) while carrying out its activities and thus disallowed the amount of salary payments amounting to Rs.93,50,700/- u/s 40(ba) of the IT Act, 1961. Section 13 which purports to deny the exemption available in certain scenarios. The bar in Section 13(1) is that the income or property of the trust should not be used directly or indirectly for the benefit of specified persons. Section 13(2) enlists certain specified circumstances where it is deemed that the income or property of the trust is used or applied for the benefit of specified persons. Section 13(3) defines specified persons. Now specified persons are defined in section 13(3) of the Act, which is read as under:

“(3) the persons referred to in clause (c) of sub-section (1) and sub-section (2) are the following namely (a) the author of the Trust or the founder of the Institution, (b) Any person who has made a substantial contribution to the trust or institution [that is to say, any person whose total contribution up to the end of the relevant previous year exceeds [fifty] thousand rupees]; (c) where such author, founder or person is a Hindu Undivided family, a member of the family: [(cc) any trustee of the trust or manager (by whatever name called) of the institution] (d) any relative of any such author, founder, person, [member, trustee or manager] as aforesaid, (e) any concern in which any of the persons referred to in clause (a), (b), (c) [(cc)] and (d) has a substantial interest.” 13. When income of the trust is applied for making payments to the persons referred to in section 13(3) supra, then exemption u/s 11 will not be available to the Trust. But this is not the case before us. The salary details and salary

ITA No.2635/Kol/2026/A.Y.2018-19 Abdur Rahim Panchanan Pal Educational Trust vs. ITO register is perused and we find that all the teaching and non-teaching staff do not fall in any of the categories mentioned in clauses (a) to (d) of section 13(3) of the IT Act, 1961, Therefore they cannot be said to be specified persons. We have examined the Affidavit of the President of the Trust (Jahangir Biswas) enclosed at page 84 of the paper book which is extracted below:

"That the Trust has been created for the benefit of the Public That the Trust is not created for the benefit of any particular religious community or caste. That any part of such income or any property of the Trust has not been used or applied directly or indirectly for the benefit of: i. The Author of the Trust or Founder of the Institution ii. Any person who has made a substantial contribution to the Trust iii. Ant Trustee of the Trust or manager (by whatever name called) of the Trust iv. Any relative of the author or founder of the Trust. v. Any concern in which any of the person referred to in the above clauses has a substantial interest. That the Teachers and other staffs are not related to founder of the Trust and the Trustees That the Trust has two separate educational institutions one is B. Ed College and another is D.EL. Ed College and the annual income of those institutions have not exceeded Rs.1crore (one crore)” 14. Thus, from the above affidavit of the President of the Trust, it is clear that the teaching and non-teaching staff are not related either to the founder of the Trust nor the Trustees of the Trust. We note that the said affidavit was presented to the AO during the course of assessment proceedings but the AO ignored the same and passed the assessment order by disallowing the salary payment amounting to Rs.93,50,700/- alleging that the same was paid to the specified persons mentioned in section 13(3) of the Act, which is completely

ITA No.2635/Kol/2026/A.Y.2018-19 Abdur Rahim Panchanan Pal Educational Trust vs. ITO wrong and cannot be sustained. Considering the above facts, we inclined set aside the order of ld. CIT(A) on this issue and to direct the AO to delete the addition of ₹ 93,50,700/-.

The order is pronounced on 28/10/2026.

Sd/- Sd/- (Pradip Kumar Choubey) (Rajesh Kumar) JUDICIAL MEMBER ACCOUNTANT MEMBER Kolkata, Dated: 28/10/2026 SAMANTA आदेश �ȧ ĤǓ�ͧ �ͪ �\ Ē ȯͪ��/Copy of the Order forwarded to: 1. \ �Ȣ�ȡ�ȸ/ The Appellant Ĥ×��ȸ/ The Respondent. 2. 3. Ȳ�Ȳͬ��आयकर] �ǕÈ�/ Concerned CIT 4. आयकर] �ǕÈ�(अपील) / The CIT(A) ��ȡ�Ȣ�ĤǓ�Ǔ�ͬ �, आयकर\ �Ȣ�ȣ�\ͬ ����,/ DR, ITAT, Kolkata 5. 6. �ȡ�[ फाईल/ Guard file.

BY ORDER, // TRUE COPY // MANISH Digitally signed by MANISH KUMAR BHOI KUMAR BHOI Date: 2026.11.02 16:48:27 +05'30' Deputy Registrar, ITAT, Kolkata

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